However, higher-for-longer rates don't always crush valuations and earnings, Bank of America strategists recently noted.
In fact, the firm found that the S&P 500 had a 15% total return per year from 1985 to 2005 with inflation-adjusted rates at 3.5%, which is far above today's 2% rate.
"Historically, when the indicator has been here or lower, 12m forward S&P 500 returns were positive 95% of the time (vs. 81% overall) with a median return of 21%," Subramanian wrote.
The Charlotte-based firm recently raised its year-end price target for the S&P 500 to 4,600, which implies 7.5% upside.
The S&P 500 is top-heavy and expensive, which Bank of America thinks makes funds following the equal-weight version of the index more compelling.
Persons:
That's, Savita Subramanian, BofA's, Subramanian, Financials
Organizations:
Bank of America, Federal Reserve, Bank of America's, of America, SSI, Bank of, Energy
Locations:
Charlotte